Corn prices nosedive

Futures market down nearly 90 cents since last week

April 03, 2013|By Jeff Natalie-Lees, jnatalie-lees@aberdeennews.com

American News Photo by John Davis

Corn prices have plummeted nearly 90 cents a bushel since Thursday, when two key USDA reports showed the nation has more corn in storage than previously thought and farmers plan to plant a record number of acres this spring.

On Thursday morning, May corn futures were trading at $7.28 a bushel on the Chicago Board of Trade. At the close of Tuesday's day session, corn was at $6.41 a bushel.

"The corn price began dropping like a rock after those reports," said Craig Haugaard, grain marketing manager at North Central Farmers Elevator's home office in Ipswich. "They stabilized on Tuesday. The major bleeding has stopped."

At one point, corn prices were $1.01 less than they were last week, he said.

The first USDA report projects that 97.3 million acres of corn will be planted this year, the highest number since 1936. A higher supply usually means lower futures prices.

The stock report showed that the United States has more than 400 million bushels of corn in storage than previously believed.

"That is the largest deviation from the average trade guess in the history of quarterly USDA Stocks reports," Haugaard said.

The price decline can be seen on signs at area elevators and ethanol plants. Last week, the price was a little more than $7 a bushel, while Tuesday it was closer to $6.20. North Central was offering farmers $6.21 a bushel. The corn price in the area is about 20 cents lower than the Chicago Board of Trade price.

Tom Fischbach, a Warner-area farmer and Brown County commissioner, said he watched grain prices fall Thursday and then again on Monday, but did not make an attempt to sell his stored corn.

A lot of people don't believe the report, Fischbach said. For example, the USDA estimates there will be 30 percent less corn used for animal feed. That is not realistic, he said.

"Markets tend to overreact," he said. "Most of the farmers are waiting to see what happens. I think we will get somewhat of a rally."

Kenny Miller, grain superintendent at the Wheat Growers Grebner Elevator near Bath, said there was no rush to sell grain during the price decline. On Tuesday it was just a normal day, he said.

Haugaard said the corn price likely will remain stable for a while with a potential rally later.

"It is hard to predict, but right now I think we will chop sideways for a while," he said. "I think we will find a level spot and then maybe stage a rally."

Haugaard said the two USDA reports have also sent long-term futures prices tumbling. For example, December corn futures on the Chicago Board of Trade, which would be the corn crop for 2013, are at $5.32 a bushel, he said.

While a lower corn price would hurt grain farmers, it would be a relief for livestock producers who use corn as feed.

"We're looking forward to potentially record plantings, which should relieve some pressure on the livestock and dairy industry, which has been under some stress," said Agriculture Secretary Tom Vilsack after the projection report was released.

Lower corn prices would also benefit the ethanol industry, which uses corn as its raw material for ethanol, dried distillers grain and corn oil. While no ethanol plants have closed in South Dakota, several have closed in other parts of the country because of high corn prices and a lack of corn availability.

Haugaard said he is not sure why the USDA stock report was so far away from analysts' predictions.

"Whatever the cause, we now have fresh numbers that paint a dramatically different supply-and-demand picture from what we were trading prior to the March 28 announcement," he said.